Understanding The Purpose Of Homeowner’s Insurance
Updated: Dec 6, 2021
Why do you need to buy home insurance? With the state of the art security system, you have installed in your home, no burglar would ever get into it without being caught. And because you are one of those who believes that their careful usage of their homes will save them from anything, you begin to think twice about buying homeowner’s insurance. But is it a good move to put off the idea of insurance altogether?
When you purchase a new home, buying home insurance has become one of the major requirements of the lender. You have the option to pay an annual fee directly to the insurance company saving you as much as 15% of the total cost or you could pay it over time in monthly intervals included in your mortgage payments. In a gist, homeowner’s insurance is the protection you buy for yourself and your home with very specific functions.
First, you purchase home insurance because your lender requires you to have one. From a lender’s perspective, it is important that the borrower’s home is insured as it is an investment of the company in itself. Your lender is basically a co-investor in the property you are buying, To protect itself from the risk of losing the property their financing, they require the homeowner to buy insurance for the property. The home is the collateral for the loan you’re applying for; thus, the lender wants to make sure that you don’t lose it and get nothing.
Second, home insurance basically has the same purpose as the insurance you buy for your car. The car insurance pays for the damages to your vehicle while the home insurance pays for the damages to your home. Whether it is the storm that tears up the exterior wall or the roof, the home insurance typically covers the cost of the repair or replacement. The replacement or repair needed to secure your home is covered by the policy you are buying for your house.
Lastly, buying home insurance is for your own protection. The idea of having your home insured is like buying your money in advance and for much less. If your home becomes a victim of theft or fire, you will need a lot of money to have it rebuilt or replace the items you own. Without insurance coverage, you might simply lose everything you have worked so hard for. Having home insurance is allowing yourself to feel safe and secure at all times, no matter what may happen.
The purpose of buying insurance may vary from the most practical to the most economical at times. However, one thing remains the same for all homeowners will home insurance — they know help will come when they need it.